International Seaways has painted a bullish picture for its earnings prospects this quarter after posting narrower net losses for the July-September period.
The New York-listed tanker player recorded net losses of $16.5m on shipping revenues of $69m in the third quarter, compared with net losses of $18.8m on revenues of $56.9m in the same period of 2018.
According to its quarterly report, the company achieved better results due to improved spot tanker earnings despite a $1.6m loss on vessel sales.
“Adjusted Ebitda came in some 8% ahead of consensus expectations of $22m,” Arctic Securities said. “We view the reported third-quarter numbers as fairly solid.”
International Seaways has fixed 69% of the fourth quarter for its VLCCs at $57,000 per day, 54% for its suezmaxes at $50,900 per day, and 47% for its aframaxes and LR2s at $30,800 per day.
“Towards the end of the third quarter, the tanker market reached an inflection point, as we realised initial benefits from the IMO 2020 low sulphur regulations, which together with geopolitical and broader macro factors led to significantly higher crude tanker rates on fixtures in September and October,” said president and chief executive Lois Zabrocky.
“As we progress in the fourth quarter, we expect the rate environment to remain robust, supported by factors such as seasonal demand strength, incremental IMO 2020 demand, and decreased vessel supply.”
She added: "With a sizeable fleet and significant operating leverage, we expect to continue capitalising on favourable tanker prospects into 2020, as overall tanker fundamentals are anticipated to remain attractive and the impact of IMO 2020 becomes more pronounced.”
The company has been selling its old tonnage and divesting from the LNG sector in recent months.
Having sold a 2004-built MR in July, International Seaways recently agreed to sell the aframax Seaways Portland (built 2002). No further details on those sales are immediately available.
In October, Nakilat bought out International Seaways' 49.9% stake in a joint venture for $123m in cash.
The joint venture owned four 216,200-cbm Q-Flex LNG carriers, namely the Al Hamla, Al Gharrafa (both built 2008), Al Gattara and Tembek (both built 2007).
International Seaways then used $100m of the cash proceeds to pay down a term loan facility that had been fetched in 2007 with an annual interest rate in excess of 8%.
This has enabled the company to cut annual interest expense by $8.2m and reduce its net loan-to-value from 45% at 30 September to below 37% on a proforma basis, according to chief financial officer Jeff Pribor.
“Going forward, we will continue to seek opportunities to optimise our balance sheet and lower our cost of capital,” Pribor said.
“We remain well positioned to further implement our capital allocation strategy in a strengthening market.”
